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The Terms of Trade and Economic Growth in the Periphery 1870-1938

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  • Christopher Blattman
  • Jason Hwang
  • Jeffrey G. Williamson

Abstract

The contending fundamental determinants of growth -- institutions, geography and culture --exhibit far more persistence than do the growth rates they are supposed to explain. So, what exogenous shocks might account for the variance around those persistent fundamentals? The terms of trade seems to be one good place to look. Using a panel data base for 35 countries, this paper estimates the impact of terms of trade volatility and secular change between 1870 and 1938. We find that volatility was much more important than secular change. Additionally, both effects were asymmetric between core and periphery, findings that speak directly to the terms of trade debates that have raged since Prebisch and Singer wrote more than 50 years ago.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9940.

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Date of creation: Sep 2003
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Handle: RePEc:nbr:nberwo:9940

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  1. Bleaney, Michael & Greenaway, David, 2001. "The impact of terms of trade and real exchange rate volatility on investment and growth in sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 65(2), pages 491-500, August.
  2. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-51, December.
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  5. Bloch, Harry & Sapsford, David, 2000. "Whither the Terms of Trade? An Elaboration of the Prebisch-Singer Hypothesis," Cambridge Journal of Economics, Oxford University Press, vol. 24(4), pages 461-81, July.
  6. Easterly, William & Kremer, Michael & Pritchett, Lant & Summers, Lawrence H., 1993. "Good policy or good luck?: Country growth performance and temporary shocks," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 459-483, December.
  7. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
  8. Xavier Sala-i-Martin, 1997. "I just ran four million regressions," Economics Working Papers 201, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
  10. Deaton, A-S & Miller, R-I, 1995. "International Commodity Prices, Macroeconomic Performance, and Politics in Sub-Saharan Africa," Princeton Studies in International Economics 79, International Economics Section, Departement of Economics Princeton University,.
  11. M. Ayhan Kose & Raymond Riezman, 1999. "Trade Shocks and Macroeconomic Fluctuations in Africa," CSGR Working papers series 43/99, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
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Cited by:
  1. Piotr Misztal, 2012. "Terms of Trade and Economic Growth in Poland in the period 1980-2009," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(45), pages 51-67, December.
  2. Syed tehseen, jawaid & Abdul, waheed, 2011. "Effects of Terms of Trade and its Volatility on Economic Growth: A Cross Country Empirical Investigation," MPRA Paper 32694, University Library of Munich, Germany.
  3. Yoshiaki Sugimoto, 2006. "Endogenous Trade Policy: Political Struggle in the Growth Process," ISER Discussion Paper 0678, Institute of Social and Economic Research, Osaka University.
  4. Luis Catão, 2006. "Sudden Stops and Currency Drops," IMF Working Papers 06/133, International Monetary Fund.
  5. Josef Falkinger & Volker Grossmann, 2005. "Institutions and Development: The Interaction Between Trade Regime and Political System," Journal of Economic Growth, Springer, vol. 10(3), pages 231-272, 09.
  6. Luis Catão & Sandeep Kapur, 2004. "Missing Link," IMF Working Papers 04/51, International Monetary Fund.
  7. Atrayee Ghosh Roy & Hendrik Van den Berg, 2009. "Budget deficits and U.S. economic growth," Economics Bulletin, AccessEcon, vol. 29(4), pages 3015-3030.

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